Consolidation plan is good first step on pension crisis
During my time in the Illinois legislature, what I enjoyed most was identifying and making good public policy. Policy that did not enrich well-positioned individuals, corporations or special interest groups. Policy that actually benefited the average taxpayer. The upcoming final week of the fall veto session provides an opportunity to pass such legislation.
I am referring to the proposal to consolidate Illinois' 650 local police and fire pension funds into two funds. As a member of the task force appointed to study and recommend changes to the current system, I want to impress on taxpayers that the current system is inefficient and costly. It is way out of step with best practices which all other states have adopted.
There is universal agreement that larger pooled investments enjoy lower fees and have more opportunity to invest in higher earning investments. Consolidation of Illinois' 650 funds into two funds will allow the administrative and fee savings and better returns to be plowed back into the funds for the benefit of retirees and taxpayers. Estimates show that we are foregoing $1 million a day by not consolidating these funds. That's right, $1 million a day!
Objections to consolidation fall into two categories: those special interests that benefit from the current proliferation of funds; and those relatively few local funds that are above average in their funding.
Not surprisingly, hundreds of funds require hundreds of staff, actuaries, attorneys, managers and board members with perks. These special interests and the board members who control who gets the fund business are opposed to consolidation. Cutting overhead, while in the best interest of taxpayers is not in the best interest of these special interest groups.
A few local police and fire pension funds do better than average, and they are right to ask if consolidation would be harmful to them and consequently their taxpayers. The answer is it absolutely will not hurt them. In fact, just the opposite; they too will benefit from streamlined management, making them even stronger.
The reason is, that even in the consolidated funds, each municipality will have its own account. This is somewhat like a bank that manages accounts of all sizes but keeps them separate. Still, each account benefits from good management and a better investment return.
The police and fire pension consolidation issue has been discussed since the 1940s. Special interests have always succeeded in blocking the consolidation. It should be noted that vast majority of task force members, even those previously on opposing sides, support the recommended consolidation legislation.
The current task force appointed by Gov. J.B. Pritzker was thorough, and its members included diverse points of view.
Legislators and citizens have become acutely aware of the critical pension problems facing Illinois. While the consolidation proposal is not a panacea, it most certainly is a solid and meaningful step in stabilizing the crisis and helping to alleviate the growing pressure on local property taxes to fund pensions.
Final negotiations can be wrapped up by this week's veto session. It is time for the legislature to act. No more excuses, special interest stalling or feigned hope for a more perfect proposal that will likely never occur.
The legislative leaders owe it to the taxpayers of this state to allow this bill to be voted on. Legislators owe it to their constituents to enact this good public policy.
Former Illinois state Sen. Christine Radogno, a Lemont Republican, served on The Pension Consolidation Feasibility Task Force. She is a member of the Daily Herald editorial board's advisory Sounding Board.